Organizational transition management of circular business model innovations
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Received: 29 September 2019 Revised: 28 April 2020 Accepted: 12 May 2020
DOI: 10.1002/bse.2542
RESEARCH ARTICLE
Organizational transition management of circular business
model innovations
Florian Hofmann1,2 | Melanie Jaeger-Erben3
1
Faculty of Economics and Management,
Department Strategic Leadership and Global Abstract
Management, Technical University of Berlin, Scholars and practitioners across fields increasingly recognize that business models
Berlin, Germany
2 for the circular economy may be an effective lever for solving ecological persistent
Department Environmental and Reliability
Engineering, Fraunhofer-Institute for problems such as climate change, biodiversity loss, and growing natural resource
Reliability and Microintegration, Berlin,
scarcity. Despite a growing interest in the potential of circular business models, inter-
Germany
3
Faculty of Electrical Engineering and connections between the organizational dimensions of firms and their business
Computer Science, Transdisciplinary model innovation processes remain underexplored. Based on problem-centered
Sustainability Science in Electronics, Technical
University of Berlin, Berlin, Germany expert interviews with business consultants experienced in circular business develop-
ment, this study creates a conceptual model that offers structured knowledge about
Correspondence
Florian Hofmann, Fraunhofer-Institute for why firms steadily reproduce linear BMs and how incumbents manifest themselves
Reliability and Microintegration, Department as a constant linear-oriented value creation system. The model also demonstrates
Environmental and Reliability Engineering,
Gustav-Meyer-Allee 25, Berlin 13355, organizational conditions and management strategies that frustrate the reproduction
Germany. of linear BMs and, thus, enable initial moves towards CBM innovation. Building on
Email: florian.hofmann@izm.fraunhofer.de
this, the article provides a set of propositions on how an organizational transition
management may be configured and what incumbents require to successfully navi-
gate circular business model innovation. The findings provide a foundation for a con-
temporary understanding of circular business model transition management, which
simultaneously serve as impulses for future research investigations.
KEYWORDS
business model innovation, circular business model, circular economy, sustainability
innovation, sustainable business model sustainability transition management
1 | I N T RO D UC TI O N model and based upon a vision of continued economic expansion and
perpetual raw material extraction, has put tremendous pressure on
Against the current backdrop of persistent ecological problems such nature. It has become evident that the current economic approach
as climate change, massive biodiversity loss, and growing resource cannot be sustained on a planet with finite resources and limited
scarcity (Rotmans & Loorbach, 2009; Schuitmaker, 2012) profound emission absorption capacities (Steffen et al., 2015).
societal change seems a necessary condition to achieve intra- and The concept of a circular economy (CE) as a potential economic
intergenerational justice and create a sustainable future transition model has gained growing popularity among corporate rep-
(Intergovernmental Panel on Climate Change [IPCC], 2014; United resentatives, politicians, and scientists (Boulding, 1966; Ghisellini
Nations [UN], 2015). In particular, the unidirectional arranged system et al., 2016; Kirchherr et al., 2017; Korhonen et al., 2018; Murray
of production and consumption, known as the “take-make-dispose” et al., 2017; Pearce & Tuner, 1989; Su et al., 2013). The CE is
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium,
provided the original work is properly cited.
© 2020 The Authors. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd
2770 wileyonlinelibrary.com/journal/bse Bus Strat Env. 2020;29:2770–2788.HOFMANN AND JAEGER-ERBEN 2771
characterized by closing and slowing down resource flows, traits that daily business routines (Linder & Williander, 2015; Sousa-Zomer et al.,
reflect a difference from linear thinking and practice (Bocken et al., 2018; Tura, Hanski, Ahola, Stahle, Piiparinen, & Valkokari, 2019; Ver-
2016; McDonough & Braungart, 2002; Stahel & Reday-Mulvey, munt et al., 2019). Second, existing CE studies have explored the con-
1981). Thus, the CE can be distinguished from current linear models tours of CBMs, describing the constitutive elements of CBMs and
production and consumption according to, first, how the flows of their strategic design that can be summarized as conceptual debates
materials are organized (i.e., closing resource flows), and second, the (e.g. Bocken et al., 2016; Hofmann, 2019; Lewandowski, 2016;
speed at which they circle within the prevailing economic order Lüdeke-Freund et al., 2018; Rosa et al., 2019). However, with a few
(i.e., slowing down resource flows). The CE connects post-use and exceptions (Bocken et al., 2018; Chen et al., 2020; Heyes et al., 2018;
process waste with production through processes such as recycling Khan et al., 2020), there is a lack of investigations of how firm man-
and repurposing of by-products, and attempts to preserve the inher- agement can initiate and navigate CBM innovation while taking orga-
ent value of products and product components by maximizing the nizational dynamics and restructuring processes into account. As such,
number of consecutive use phases and use time in each of these the organizational dimension of CBM innovation remains uncharted
phases via repair, maintenance, upgrade, resale, refurbishment, territory. Contrary to the predominant view of firms in existing CBM
remanufacturing. CE advocates argue that the imperative of continu- literature as static entities, firms are social systems that are simulta-
ous economic growth can thus be perpetuated by decoupling expan- neously stable and dynamic in their emergence, thereby characterized
sion from ecological burdens (European Commission [EC], 2016; Ellen by a constant state of flux. They are composed of a multitude of
MacArthur Foundation [EMF], 2013; Rubel et al., 2018). Whether this events and occurrences that actually cease at the moment of their
target horizon, articulated from an ecological modernization position, emergence if they are unable to generate an impact over time
is legitimate and justified to accomplish the transition from the con- (Luhmann, 2009; Weick, 1979). Thus, the development of a firm is
temporary “cowboy economy” (Boulding, 1966: 9) towards an eco- continuously uncertain, subject to a myriad of opportunities and
nomic system that flourish within planetary boundaries (O’Neill et al., shaped by creative moments, which unfold their dynamics through
2018; Steffen et al., 2015) should not be discussed here, but some the reciprocal interplay of decision patterns, communication struc-
authors propose first tentative ideas to overcome the growth dictate tures, and series of acts (Rüegg-Stürm & Grand, 2016). The rotational
in order to diversify CE conceptualizations (e.g. Hofmann, 2019; searching, experimenting, and learning to stimulate BM innovation
Hobson & Lynch, 2016; Millar et al., 2019; Zink & Geyer, 2017; can only be successfully evaluated if these dynamic organizational
Zwiers et al., 2020). The study presented here adopts an agnostic atti- dimensions of the firm are taken into account (Foss & Saebi, 2015).
tude to economic growth (Raworth, 2018), and rather emphasizes to But current CBM literature has mostly overlooked this research
reduce the absolute depletion of nature between the dialectic of con- domain, and offers a rather static view of a complex and constantly
sumption and production. changing corporate reality.
Scholars and practitioners have stressed the importance of inno- This study attempts to fill this gap in the literature by pursuing
vative business models (BMs) in accelerating the shift to a CE, perceiv- the question of “how” firms can navigate transitions to CBMs. Draw-
ing such BMs as levers and instruments to the “process of industrial ing on problem-centered expert interviews with business consultants
mutation” (Schumpeter, 1976: 83). Novel BMs have the potential to who offer advisory services for circular business development, the
trigger market irritations, and, by extension, the restructuring of the study provides a set of propositions on how an organizational transi-
organizational processes of entire societies, as they couple multiple tion management may be configured and how to assist incumbents in
social actors and mediate between the spheres of production and navigating CBM innovation. Section 2 introduces circular business
consumption (Bidmon & Knab, 2017; Evans et al., 2017). Corporations model innovation as a type of radical corporate change and renewal.
with circular business models (CBMs), in particular, are said to disrupt Section 3 describes the study’s research design, while Section 4 aggre-
the unidirectional and linear industrial economic system from within gates the main findings in a conceptual model. Finally, Section 5 dis-
(Schaltegger et al., 2016). One critical question that remains unan- cusses three propositions on the organizational conditions and
swered by extant CBM literature is how firms can successfully navi- management recipes that advance CBM innovation in incumbents.
gate corporate transitions to circularity? CE research at the corporate These propositions reflect starting points for a contemporary under-
level has typically concentrated on two types of research questions. standing of firm transitions towards circularity and serve as impulses
First, such research has considered justifications for companies for future research directions.
embracing modes of circular value creation and offerings, focusing on
motivational aspects, drivers, and opportunities of CBM innovation 2 | CIRCULAR BUSINESS MODEL
(such as enhancing competitiveness by increasing cost efficiency due INNOVATION AS A FORM OF RADICAL
to lower demand for energy and physical resource inputs; attracting CORPORATE RENEWAL
new environmental-conscious customer segments; or becoming more
autonomous and independence from volatile commodity markets, Objectively, BMs consist of interlaced interpersonal acts and commu-
(Gusmerotti et al., 2019; Planing, 2018; Rizos et al., 2016; Rubel et al., nications among internal and external stakeholders as well as human-
2018; Whalen et al., 2017) and the financial, organizational, market, object interactions (e.g., human-artifact, human-computer, human-
and institutional risks and barriers of integrating CE principles into machine, human-robot) that configure the specific value creation2772 HOFMANN AND JAEGER-ERBEN
system of firms. From these perspectives, BMs reflect the empirically market and social conditions. However, CBMs appear to be effective
observable functions of firms that distinguish them from other market instruments for an ecological-oriented process of “creative destruc-
actors (Massa et al., 2017). Thus, they articulate a firm’s unique central tion” (Schumpeter, 1934) that replace linear production and consump-
mode for creating and capturing value, which can be understood both tion styles with styles that incorporate principles of dematerialization
in terms of processes (i.e., dynamics of activities, resources, and net- and decarbonization. CBMs may erode and provoke existing industry
works of social actor groups) and results (i.e., products and services arrangements, restructure entire supply chains, or even create new
that appear as vehicles of values) (Casadesus-Masanell & Ricart, 2010; markets. To be a driver for solutions that ensure the future viability of
Demil & Lecocq, 2010; Massa et al., 2017; Osterwalder et al., 2005). the modern civilization and to secure their own long-term existence
From a subjective perspective, BMs are images of firm representatives as an organization in a world of changing socio-ecological parameters,
and persons who are directly and/or indirectly influenced by the com- and thus also shifting economic circumstances, firms must navigate
pany and how such individuals construe the company’s value creation into unexplored arenas, where previous experiences, knowledge
system. Hence, BMs are mental models or cognitive schemas of indi- stocks, and loyal customer bases are not survival variables. Incum-
viduals who subjectively construct their own representations of the bents that manage and organize CBM innovation need strategies that
boundaries between the firm and its environment, its procedures for differ from those designed to handle circular dyed BM adjustments or
social interaction, and potential trajectories for future development adaptations. Saebi’s (2015) research provides a foundation for com-
(Aspara et al., 2013; Doz & Kosonen, 2010; Magretta, 2002; Massa paring the different types of BM reconfigurations in the context of
et al., 2017; Rüegg-Stürm & Grand, 2016; Velu & Stiles, 2013). the CE (Table 1).
In the face of climate change, the increasing devastation of
nature, and growing resource scarcity, companies need to transform
their BMs more rapidly and more extensively than ever before. One 2.1 | CBM Adjustment
possible response to these socio-ecological megatrends is the CBM.
This approach connects business configurations focusing on result- CBM adjustment refers to the reproduction and stabilization of the
and performance-oriented product-service-systems; manufacturing existing BM(s) to maintain linearity. Change processes are focused on
and offering durable, reliable, recyclable, modular, and repairable gradual adjustments in the firm’s existing mesh of activities and
products; and/or practicing conscious sales (slow fashion etc.) (based resources, such as reducing production waste and making incremental
on Bocken & Short, 2016; Bocken et al., 2016; Dyllick & Hockerts, alterations in operating routines to increase energy efficiency. Busi-
2002; Young & Tilley, 2006) with the consumption side of business ness resources, networks, and offered products and services remain
that involves (non-)consume decisions such as repairing, maintaining, the same. The scope of change is limited to a few efforts; adjustment
upgrading instead of buying new products; second-hand purchases; causes neither a shift in standard value creation processes nor a modi-
sharing; or the use of corresponding services that can be summarized fication of linear-oriented value creation modes. Principles of acceler-
as “sufficiency”. CBMs are concerned with downscaling overall end- ation are still pursued.
user consumption and reducing the tangible products necessary to
fulfill user needs (Freudenreich & Schaltegger, 2020). CBM innova-
tions are assumed to contribute more or less intentionally to the 2.2 | CBM Adaptation
deceleration of natural resource consumption by restraining demand
by educating and empowering consumers, prolonging product life- Matching the demands and expectations of the social environment is
times, dematerializing value propositions, and adopting a modified the core motive of CBM adaptation. This reconfiguration represents
attitude of marketing. continuous sequences of incremental improvement to adapt to the
CBMs are diametrically opposed to dominant business changing social environment. Value creation activities, resources, net-
approaches of the last decades, which mostly tend to incorporate works, and their outcomes can be affected simultaneously, with vary-
principles of acceleration, such as raising the frequency of product ing degree of change imposed. Examples of CBM adaption include
innovation and boosting the number of products sold within a time beginning to repurpose by-products and use recycled instead of raw
period, to increase competitiveness (Boutellier et al., 2008; Krajewski materials. The scope of change may involve a degree of novelty to the
et al., 2016). Burdened by their own linear aligned traces of the past firm, causing shifts in routine standard value creation processes and
and cultural fixation on the “take-make-dispose” paradigm, firms are slightly altering the value creation mode from linearity to the closing
embedded within financial, institutional, legislative, infrastructural of resource flows. Principles of acceleration are still pursued.
arrangements that are shaped by path dependencies of linearity and
that proactively encourage and support the design and development
of linear BMs (Tura et al., 2019; Vermunt et al., 2019). These struc- 2.3 | CBM Innovation
tures may contribute to a broader environment in which such a pro-
found change in value creation modes appears unviable. Since CBMs The main goal of CBM innovation is to shape markets, industries, and
are accompanied by extraordinarily high risks and uncertainties, CBMs society by creating new and sustainable linkages between production
may be considered economically irrational under contemporary and consumption systems. CBM innovation involves “the discovery ofHOFMANN AND JAEGER-ERBEN 2773
T A B L E 1 Circular business model adjustment, circular business model adaptation, circular business model innovation, adapted from
Saebi (2015)
Circular business model
adjustment Circular business model adaptation Circular business model innovation
Planned outcome Minor adjustments Align with the social environment Shape markets, industries, and the
society
Scope of change (activities, Narrow (activities) Narrow-wide (activities, resources, Wide (activities, resources, networks,
resources, networks, value networks, value propositions) value propositions)
propositions affected)
Frequency of change Continuous Periodically Infrequently
Degree of radicalness Incremental Incremental Radical
Degree of novelty Not applicable Novelty is not a requirement for the Novelty is a requirement for the social
social environment environment
Degree of linear detachment Not applicable Low High
Mode of circularity Not applicable Close resource flows Close and slow down resource flows
a fundamentally different BM in an existing business” (Markides 2006, epistemological interest of this study was not to reconstruct subjec-
20). Thus, the process of change requires shifting value creation activ- tive perceptions of the world, but to reveal its underlying social
ities, resources, networks, and their outcomes from an existing BM to phenomena.
CBM. The scope of change involves novelty to the firm that results in
entirely new value creation processes, which must be tested, learned,
and re-stabilized. Such change comprehensively alters the value crea- 3.1 | Data Collection and Sample Selection
tion mode from linearity to closed and slow resource flows, with prin-
ciples of acceleration no longer pursued. Problem-centered interviews (Witzel, 2000) were conducted to exam-
ine the organizational management of CBM innovation. Problem-
centered interviews represent a theory-generating method that inte-
3 | R E S E A R C H DE S I G N grates inductive and deductive thinking to increase knowledge of a
certain phenomenon. In total, 12 representatives of nine business
This study attempts to identify management recipes that facilitate the consultancies were interviewed over the course of two phases (April
interruption of the structurally entrenched inertia of linearity plaguing 2019 – May 2019; February 2020 – April 2020). A high-level repre-
many firms and foster organizational transitions towards CBMs inno- sentative of each consulting firm was interviewed. For the three rela-
vation. How might an organizational transition be managed? What tively new and small consultancies, this representative was the
conditions must be created to assist incumbent firms in navigating founder or CEO. For the six medium-to-large consultancies, the inter-
CBM innovation? viewees were associates, senior consultants or department heads. The
To answer these questions, this study adopted a qualitative interviews, which lasted between 55 and 90 minutes, were carried
approach that allows for the exploration of CBM innovation’s com- out in German. Six interviews were conducted face-to-face and six
plexity. Firms are social systems that are stabilized through continu- interviews were conducted by phone, with the latter method used
ous mutual interactions between people. Due to the non-causality due to contact restrictions related to the COVID-19-Pandemic. The
and unpredictability of social systems resulting from their own open business consultancies were identified through extensive web
decisiveness, firms are controllable only to a limited extent. As a searches and personal expert recommendations. Selection criteria
result, they are not unambiguously determinable (Baecker, 1999; focused on ensuring representatives had a high level of knowledge on
Luhmann, 2011; Rüegg-Stürm & Grand, 2016). Furthermore, firms, as the subject. Firms were selected only if advisory services for circular
heterogeneous organizations, are connected to and influence the organizational transition processes constituted either the core compe-
environment in which they are embedded (Dougherty, 2002). Qualita- tence or a substantial part of the consultancy’s value proposition. The
tive research methods such as problem-centered interviews enable representative must have had several years of experience in the field.
the exploration of such complex systems through the reconstruction Firms of varying size were selected, with the sample including small
of systemic patterns. Since qualitative research strives to characterize business consultancies that focus solely on circular organizational
the dynamics of observed social phenomena, a qualitative approach change to large consultancies offering a wide spectrum of advisory
helps shed light on why and how structures solidify and acts become services (e.g., building and supporting coalitions, venture capital
routines, the conditions that may elicit organizational reinventions, assessments, strategic planning, product development, and public
and the temporal and emergent contextual circumstances and con- affairs). Geographic representativeness was also sought, with firms in
straints of such reinvention (Dougherty, 2002). Consequently, the Europe, particularly in Germany selected.2774 HOFMANN AND JAEGER-ERBEN
Business consultants were chosen as subjects because they act as be conspicuous and relevant for the topic clusters, were deepened by
advisors who use their expertise, networks, and abilities to advise further inquiries using the pre-formulated cluster sub-questions. All
firms, therefore contributing to arrangements of and developments in interviews were recorded and then transcribed.
markets and industrial sectors. As mediators of factual and experien-
tial knowledge, they supervise and observe organizational transitions
as “experienced events” in their everyday business life. Consequently, 3.2 | Data analysis
they are relevant to social negotiation processes as economic authori-
ties, with the ability to affect the thinking and actions of corporate The obtained data in the form of written communication was
leaders. As consultants have a certain degree of interpretive sover- processed and interpreted with the use of the Grounded Theory
eignty over socio-economic developments, examining their experi- (Glaser & Strauss, 1967; Strauss & Corbin, 1990). This approach to
ences and insights on circular-oriented business changes assists in data analysis allows the development of theoretical concepts
drawing conclusions about contemporary and future CBM formations grounded in the phenomenon of interest rather than relying on pre-
and dynamics. Additionally, to date, no research on corporate-level existing models and theories[1]. Grounded theory, thus, prevents the
circular change has relied on business consultants as a source of premature narrowing of the researcher’s perspective while simulta-
knowledge generation. neously promoting the concise description of the observed phenome-
The problem-centered interview procedure and the semi- non. Open, axial, and selective coding were used to interpret
structured interview guide were conducted to be “as open as neces- interview transcripts (Strauss, 1987). While the first coding type is
sary and as structured as possible”. The intention was to arrange an often situated at the beginning of a study, with the third type situated
interview setting and a communication process during the interview closer to the end (Dougherty, 2002), separating these coding phases
in such a way that the systems of meaning and the situational subjec- into three chronologically successive analysis phases was therefore
tive truths of the interviewees could unfold. Nevertheless, a certain neither appropriate nor practicable, as Grounded Theory is recursive
structure was imposed to ensure comparison across interviews. The in nature. Using open coding, we sequentially examined text blocks to
interview guide was structured using six topic clusters: (1) personal open up new dimensions of meaning behind the obviously perceived
experiences with CBM innovation; (2) experiments with circular- surface of the text. That is, we broke down the manuscripts into sub-
oriented organizational transitions; (3) irritations and triggers; (4) risks textual interpretive codes, looking to generate as many codes as pos-
associated with CBM innovation processes; (5) the functional rational- sible to ensure accurate analysis of the text. Next, the codes were cat-
ity of CBMs; and (6) organizational capabilities and competencies. In a egorized according to the addressed phenomenon and its relevant
first step, the interviewees had the opportunity and space to narrate characteristics, contexts, and actors. Open coding procedure resulted
their own stories about the defined research object (topic cluster 1). in a list of codes placed in provisional categories alongside including
The opening of the interview was therefore conceptualized to sponta- comments and explanations of each code. Next, we identified several
neously address as many interesting and pertinent facets as possible. axial categories for which further elaboration seemed worthwhile.
In a second step, passages of the shared insights, which appeared to This axial coding aimed to refine and differentiate the categories and
TABLE 2 Coding paradigm, adopted from Strauss and Corbin (1990)
Components of the coding
family Explanation
Phenomenon The real-world incident described, interpreted, and elaborated by the axial categories.
What does the data ultimately address?
Causes The term refers to conditions that contribute to the occurrence and development of the phenomenon.
What leads to the investigated phenomenon?
Context Causes usually emerge in a specific setting that facilitate or restrict the options for interfering actions of individuals
and social groups.
What are the circumstances for potential interfering actions?
Interfering actions Interfering actions are processes and have therefore a temporal course. They are purposeful and often done for
identifiable reasons.
How do the actors stimulate or handle the phenomenon?
Consequences Interfering actions that are focused on the phenomenon lead to certain effects. Those are not necessarily predictable
and intended.
What do the interfering actions lead to?
Intervening conditions Intervening conditions refer to the overall social, cultural, technological, and ecological developments that affect
directly or/and indirectly the phenomenon.
What are the general circumstances that influence the phenomenon?HOFMANN AND JAEGER-ERBEN 2775 identify relationships between them. To establish linkages between 4 | RESULTS categories, we examined passages where categories appeared in con- junction with other categories. We used the coding paradigm Instead of presenting the results following the chronological order of according to Strauss and Corbin (1990), which consists of (1) phenom- the coding process, we describe them aggregated in the conceptual enon; (2) causes, (3) context, (4) interfering actions, (5) consequences, model “Frustrate linearity: Venturing transition towards circular busi- and (6) intervening conditions to generate cumulative knowledge ness models” (Fig. 1). It depicts the main output of data analysis, dis- about the relationships between the categories as well as between playing the main dimensions and categories related to the stabilization the categories and the researched phenomena (Table 2). Selective of linear BMs and, conversely, transition tendencies towards CBMs. coding was then employed to create a conceptual model. We identi- Table 3 provides a glossary of the categories identified during coding fied the main attributes, interactions, circumstances, and settings of and representative quotes from interview data. This conceptual model the research object to offer a condensed view of the data. Finally, to offers structured knowledge about why firms steadily reproduce lin- formulate propositions about the organizational transition manage- ear BMs and how incumbents manifest themselves as a constant ment of CBM innovation, we constantly assessed the coding catego- linear-oriented value creation system. The model also demonstrates ries in light of two types of processes: “stabilization of linear business organizational conditions and management strategies that frustrate models” and “transition tendencies towards CBMs.” Organizational the reproduction of linear BMs and, thus, enable initial moves towards transitions are occurrences that proceed over a certain period of time, CBM innovation. Analysis reveals mutual interdependencies between in which something gradually emerge. Therefore, the procedural con- the categories identified during coding, which are discussed in the fol- trast of two differently evolving phenomena is of empirical value. lowing subsections. Thus, they are not to be interpreted as clearly Hence, the conceptual model reveals the central story about the phe- separated, but as continuously evolving and interrelated entities. nomena that is conserved in the analyzed data. As with all conceptual 4.1 | Stabilization of linear BMs models, the final model presented in this paper necessarily abstracts social life by creating a simplified picture of reality. However, a com- The data collected and analyzed in this study indicate that the initia- plete depiction is not intended at all. Rather, we sought to identify the tion of radical BM innovation, as they are embodied in CBMs, can be main influencing parameters that appear to be important for the metaphorically described as a black box. A black box is a simplified observed phenomena. representation of a complex system processing specific stimuli to FIGURE 1 Frustrate linearity: Venturing transition towards circular business models
2776
TABLE 3 Glossary of the conceptual model “Frustrate linearity: Venturing transition towards circular business models”
Causes I Explanation Quotation from interviews
Tentativeness Tentativeness is an organizational attitude “They (companies) do not know how to
that is characterized by a lack of approach it (CE in business). . . . Even
resoluteness and a reactive behavior. It then we have problems to find companies
refers to a relatively stable mindset of the who would like to do this with us. The
company to assess a wide range of companies are a bit overstrained and
environmental developments as overwhelmed.”—Interviewee D
potentially threatening. Tentativeness is “And we usually did a second workshop and
the consequence of a loss of confidence the idea (CBM) was followed up,
to anticipate future pathways, triggered deepened again and we took into account
by uncertainty and perceived the feedback that came from the
heteronomy. company. Most of the time there were
many barriers that were identified. . . .
‘Yes, we try to change the thinking in the
company and communicate the topic, but
we are not doing a new project now.’ So
this was often the conclusion. We spread
it within the company, but it does not
have to be immediately.”—Interviewee E
Intra-organizational separation Structuring the organization into strictly “In the classical pyramid I am actually
segmented corporate divisions. Rewards trapped in my box as an employee. I have
for individual or departmental success a job description, it says right in there:
instead of incentives for joint success This is my job task, but please do not look
across divisions. Interdisciplinary left and right. This leads to silo thinking in
teamwork is rarely practiced. Lack of a companies. . . . The interesting aspect is
holistic and systemic perspective on the that it can be observed that thinking
own company and its social environment. sustainability in these boxes is incredibly
difficult.”—Interviewee G
Inter-organizational separation Dividing the units of a value chain network “I believe that economic activities have so
into specialized and highly differentiated far been more concerned with sealing
firms. Focus on core competencies. The themselves off. To protect intellectual
resulting highly fragmented value chains properts, etc. And if you really want to
lead to cooperation with directly implement it (CBM), then you have to go
connected upstream (suppliers) and completely new ways.”—Interviewee F
downstream (customers) actors. Lack of a “The value chains are highly fragmented
holistic and systemic perspective on the today.”—Interviewee B
value creation network.
HOFMANN AND JAEGER-ERBENTABLE 3 (Continued)
Causes I Explanation Quotation from interviews
Heteronomy Heteronomy means “other-directed” and “They fight with their backs to the wall.”—
therefore is in contrast to autonomy. Interviewee B
Since Immanuel Kant (1974) it has been “They are often not as fast as changes in
understood as a partial restriction of the society are happening at the moment.”—
free will. However, heteronomy does not Interviewee C
leave opportunities for self-initiated "They prefer to stick to what they can do as
HOFMANN AND JAEGER-ERBEN
schemes and projects. It is rather a long as the shoe does not squeeze hard
voluntarily chosen dependency on enough.”—Interviewee D
external impacts and influences to hand “There are three main pressure points why
over the responsibility to other social companies are looking at Circular
actors. Economy.” -Interviewee B
Causes II Explanation Quotation from interviews
Ecological The own societal efficacy (negative as well as positive) is consciously perceived, reflected, and “How can we as a firm not just operate by launching products on the
performativity utilized to face the ecological persistent problems of the 21st century. Future-oriented and market, but how can we actually become an enabler of a sustainable
strategic thinking does not merely strive to strengthen competitive advantages and expand lifestyle? How can we optimize our solutions to ensure a good life?”—
market shares but simultaneously to contribute effectively to the reduction of the systemic Interviewee D
nonsustainability. Performativity does not imply adapting to stakeholder needs in a reactive “Indeed, a holistic design of our solutions and caring for the society”—
sense, as proclaimed in the stakeholder approach, Freeman & McVea, 2001), it rather means Interviewee F
changing proactively social conditions, rules, and practices in the light of sustainability transitions. “My findings of the last years are: Everyone is tending to blame the others
The term performativity derives from the theory of speech acts, which was developed by the first. Always. And we are all in the waiting position. . . . Waiting for the
philosopher of language John L. Austin (1962). He uses performativity to refer to the action perfect solution. Companies, they do it by the same logic. It's always the
dimension of speaking, that is, to do what is mentioned in the act of speaking and not merely to blame game. . . . I know X, they say: ‘Hey, that's cool. Climate change is
designate it. crucial for us, let us give it a try!’ Let us give that a try. That's what is
missing.” -Interviewee G
Ambidexterity Ambidexterity includes the management of contradictions, polarities, and incompatibilities (O'Reilly “Circular Economy is one of our core topics” We want to do something
& Tushman, 2004, 2008; Simsek, 2009). It is the prerequisite to compose conflicting business with it, and now we are setting up a team that thinking about how we
approaches—exploitation and exploration—that allow both to coexist simultaneously. While can put this into practice.”—Interview A
exploitation focuses on designing mainstream linear operations more efficient (such as using less “I think they have to initiate experiments, like in the case of digitalisation.
material per product or reducing production process waste), exploration aims at searching for, After all, there are quite a few companies that are realizing how this
playing with and discovering of new CBM opportunities. Ensuring an appropriate balance topic will replace their current business model in ten years at the latest.
between exploitation and exploration is a primary condition for long-term organizational survival And they realize that the people they have sitting here, they are not
(March, 1991). Nevertheless, the strategic intention is to irritate, provoke, and finally abandon the skilled and prepared for this develoment, and they are not agile enough.
current linear and unidirectional BM through circular value creation modes. And they do not know how to take the company into this new age. And
what are they doing? They are often spinning off digital units.”—
Interviewee G
“Based on my experience, in order to be successful they (CBM
experiments) always have to be structural divided in some way. It does
not necessarily have to be an independent company, which has a
completely different ownership structure, but i think it is almost
impossible to create a disruptive model within the existing business,
because the experiment will always depend on the resource allocation
from the core business.”—Interviewee B
(Continues)
27772778
TABLE 3 (Continued)
Causes II Explanation Quotation from interviews
Incorporation of the The boundaries between functional subsystems (departments) within the company become more “So, I think basically they need a high degree of interdisciplinarity. They
unknown, transparent and porous. The aggregated expertise and experiences of several people with need skills to communicate with each other, how they can develop ideas
intra-organizational different disciplinary backgrounds may produce more accurate foresights and together.”—Interviewee E
sustainability-driven decisions than those of a small number of experts. The underlying principle “The insight was that the teams that were actually successful with
of collective wisdom fosters interdisciplinary management of problem solving (Birkinshaw & sustainable design are the ones that have an interdisciplinary teams”—
Ansari, 2015). Consequently, new intraorganizational forms and processes of mutual learning Interviewee E
emerge which attempt to bring together the previously separated and unknown. “The first issue we need to address is that there is no disciplinary thinking.
As in almost every company, or as in the scientific world, they are
usually also disciplinary structured. Most of them have an organigram
with a typical state structure from top to bottom, and when a project
like this (CBM experiment) is done, they suddenly connect different
departments in an inderdisciplinary way. And that is a big challenge for
the company.” -Interviewee H
Incorporation of the The boundaries between the participating actors within the value creation network become more “For example, a supplier of agricultural products can explore something
unknown, transparent and porous. Communications and the exchange of information across different actors like urban gardening trends, where people are creating gardens privately
inter-organizational in the value creation network are more intensive, open and flexible, so that cocreation for fun, and may ask, is this interesting for me? Do I have a link to them?
procedures and open approaches (Open Data, Open Design, Open Standard, etc.) become Can I supply them with what I have? Do they need my knowledge? Can
increasingly important. Moreover, strategically relevant relationships between companies and this become a business model? Can I actually learn something from
noneconomic actors change. This means that consumer protection agencies, NGOs, local them?”—Interviewee G
communities, and social-ecological initiatives (e.g., Fridays for Future) participate more directly in “The most important thing is collaboration, especially with external parties.
corporate strategic negotiation processes. This means the ability to work constructively with others and to build up
trust.”—Interviewee B
Context I Explanation Quotation from interviews
Modus of Individuals (e.g., employees) and social groups (e.g., departments, entire companies) “There is still the tendency to think, plan, and act in quarter- and semi-circles, but the circle
cooperation interoperate with other individuals (e.g., colleagues) and social groups (other departments is never completely closed”—Interviewee G
within the company or other actors across the value creation network) to pursue and
achieve their own individually formulated objectives. The motivation of the participating
actors to initiate jointly coordinated processes and systems is based on maximizing the
individual or organizational benefits. Value creation is perceived as “succession” (one
after another).
Short-term The tendency to focus economic thinking and planning on short-term gains and target “They launched sustainable textiles on the market. ‘Bio-fair would be great!’ They
time definitions. The future is perceived as a corridor that refers to a relatively short period of developed their own sustainable product group, and released it. After two years the sales
horizon time. figures were disastrous. Disappointed they noticed to the retailer and consumers:’listen
up, sustainability is important to us. We offered it, you did not buy it, and so we will not
do it again. That did not pay off.‘That is the classic reaction of 95% of the companies.”—
Interviewee G
Context II Explanation Quotation from interviews
HOFMANN AND JAEGER-ERBENTABLE 3 (Continued)
Context II Explanation Quotation from interviews
Modus of Individuals (e.g., employees) and social groups (departments, entire companies) “And I think it requires a different kind of interaction (across the value creation network).
collaboration interoperate with other individuals (e.g., colleagues) and social groups (other Not just a transaction, in the sense of money and goods, but a real collaboration.”—
departments within the company or other actors across the value creation network) to Interviewee G
pursue and achieve collectively formulated goals. The motivation of the participating “It is obvious that Circular Economy, especially for companies, means: “I am not alone in the
actors to initiate jointly coordinated processes and systems is based on securing world.” Traditionally, I purchased something and I delivered something else, and I wasn't
individual or organizational viability and operability while developing solutions that interested in anything else. But when I do circular design, I have to take all my value
HOFMANN AND JAEGER-ERBEN
address societal challenges (in the case of the CE: to close and slow down resource creation network actors with me, and I have to design a circular product together with
flows). Value creation is perceived as “togetherness” (with one another). them.”—Interviewee G
“This means that the company must collaborate. And that is actually a completely different
way, how shall I describe it, it requires the collaboration between different actors,
between different companies. I think it is something completely novel that you need
collaboration if you want to implement it (CBM). No company can do this alone. I guess
it's almost a new, if you think about it, almost a new paradigm somehow. That you are
forced to work together, maybe even with potential competitors or
whatever.”-Interviewee A
“So that the performance of your company depends on how successfully you work together
with others. And not how successfully you use your elbows.”-Interviewee B
Long-term Far-sighted and future-oriented economic thinking and planning. Acting with foresight and Well, it's no surprise that X is doing it, where there is an ownership structure behind it that
time horizon imagination. is not quite impatient as in many other companies.”—Interviewee B
“So, how a company manages to move away from quarterly thinking. And there are nice
examples of companies that refuse to release quarterly figures because they say: ‘That's
not who we are. We only report annually, that has to be enough. And investors who only
look at the quarter, we do not want them at all. Of course, this is extremely important,
because such things, most sustainability issues, circular economy included, are issues that
do not have a positive impact on business success in the next quarter.”-Interviewee B
Interfering
actions I Explanation Quotation from interviews
Ecological Development of new material compositions (e.g., the substition of raw materials through “Circular Economy actually means the inner cycles, those with the higher added value
modification of recycling materials), switching to biodegradable packaging or the improvement of and not only when we focus on recycling materials, but rather leasing and so on. How
product product energy efficiency for a more ecological product design. can we keep the products in circulation?”—Interviewee C
features “A performance business model or an access business model like X or Y is much more
radical.” Interviewee D
Circular washing Effective intraorganizational and interorganizational communication of CE efforts that “Many companies tend to start gradually and argue: ‘Well, let us make a product a bit
merely peripherally changes BM for linearity. Public relations approach aimed at more sustainable, and check if we can do something good with one product or
promoting an environmentally friendly and responsible image without sufficient material.’ Of course, this also supports communication.”—Interviewee F
evidence. The term alludes to circularity as a symbol of nature protection and “Y has, I think, signed a contract with a company that recycles plastic from the sea and
“whitewashing,” which means using misleading information to gloss over noncircular turns it into polymers, which Y then calls “B.” Whereby my perception is that this is
organizational behavior. more like, I do not want to criticize it too much, but these are more like CSR activities,
where it's a matter of demonstrating that you are doing something. But the intentions
at Y on how core processes can be designed in a circular way are, to my knowledge,
very, very poorly developed.”—Interviewee B
Interfering actions II Explanation Quotation from interviews
2779
(Continues)TABLE 3 (Continued)
2780
Interfering actions II Explanation Quotation from interviews
Arranging new spaces Setting up arenas of circularity that are disconnected from everyday settings to test, “We are building a small cycle out there on a green meadow far away from anything
for circular business negotiate, reflect, and evaluate new game rules with the long-term goal of replacing that disturbs. There you can gain experiences, earn money, involve your apprentices,
model exploration the existing competencies and skills that support linearity. there you can do whatever you want.” Interviewee F
“Freedom within the company”—Interviewee A, on the question what is required to
implement CBMs.
“The basic conditions must be fixed, but within this setting it is important to give
people the freedom to live out their own creativity and drive.”—Interviewee A
Adopting of novel Overall organizational success and business success is measured in balanced ecological, “They developed their own assessment software because they argued: ‘we do have
performance social, and financial performance indicator sets. different needs and they cannot be covered with the available SAP applications.’
indicator sets Here, they also try completely different things.”—Interviewee G.
New forms and scopes Cultivating stronger relationship meshes with actors that are directly or indirectly “When you think about good life and sustainability, you have a lot of competencies in
of strategic alliances influenced by the value creation activities through novel consulting formats and the company, but never all of them. And you will never have the external networks
ownership models. This may involve an advisory team with representatives of civil that have, for example, critical NGOs in the consumer sector, in the environmental
society groups (consulting format) or jointly-owned enterprise models such as sector, in the animal protection sector, whatever. And if you take these issues
multistakeholder cooperatives, hybrid cooperatives, or platform cooperatives seriously (CBM innovations) and you really want to make a differenc, then establish
(ownership models). an external advisory board that will accompany you along the way (toward
circularity). It will continually gives you impulses from outside.”—Interviewee G
“And that's where exciting new ideas emerge, and both of them leave their bubbles a
little bit and try to get involved with the other's system. This is just like E, when they
try to bring the NGO world into the company, which is a very important driver of
innovation and also an early detection system.”—Interviewee G
Personnel changes Establishment of appropriate personality and role structures that stimulate innovation “It is stuck in deeply. And when people have another idea and claim: ‘We are going to
dynamics towards circularity. do a high-risk project.’ Of course, the first reaction will be: ‘That is money wasting,
because this is not how the market works.’ The argumentation ‘it is like that, it works
like that’, which is not malicious at all, but is simply used from a long horizon of
experience of the past.”—Interviewee B
“Our corporate culture, is it appropriate or does the culture still need to be changed?
There are often processes of personnel changes if someone does not carry such a
culture. Yeah, out. I mean, yes, that's the way it is. And with generational change
they often already have this kind of alternation.” -Interviewee H
Quotation from
Consequences I Explanation interviewees
Stabilization of business models for linearity Reproduction of linear and unidirectional value creation modes. -
Consequences II Explanation Quotation from
interviewees
Organizational transition tendencies towards circular business Innovation dynamics that successively overcome linear BMs and simultaneously enable circular value
models creation modes.
Intervening
conditions Explanation Quotation from interviewees
HOFMANN AND JAEGER-ERBENTABLE 3 (Continued)
Intervening
conditions Explanation Quotation from interviewees
Market Includes intensity of competition, cost pressure, innovation pressure, etc. “We need new approaches to remain competitive.”—Interviewee D
dynamics “But I think there are also the other companies that do this (CBM experiments) rather due to
competitive pressure.”—Interviewee E
Scarcity of Human demand for finite and renewable natural resources exceeds their reproduction “So, there is an economic rationale, but this is really only the case with basic materials or
natural capacities, leading to their overuse and depletion. raw materials where a shortage is foreseeable.”—Interviewee B
HOFMANN AND JAEGER-ERBEN
resources “There was the need from a resource perspective (to reorganize the current BM for
lienarity).”—Interviewee C
Consumerism Economic theory and economic doctrine that a progressively greater consumption of goods “There must be a complete change in consumer behaviour (to change toward a CE), and this
is economically beneficial. Moreover, consumerism can be associated with personnel in turn requires education and awareness.”—Interviewee F
attachment to materialistic values and possessions. “Changing values and changing consumption patterns, these are the really powerful drivers
(to implement successfully CBMs), which ideally also lead to the collapse of companies
that are completely resistant to moving toward sustainability.”—Interviewee G
“And if you look at this long list about what makes us happy, you notice, ahja, in the top ten
there is barely or nothing materialistically involved. So why do we strive intensely for it, if
it does not seem to determine our happiness?”—Interviewee G
Legal The current laws and legislative regulations at national and supranational level. “There are a lot of laws behind it and structural processes, which all have to be changed to
framework become active (to experiment with CBMs).”—Interviewee E
“The second major driver (towards CBMs) is regulation.”—Interviewee B
Political Proposed legislation and reform programs that are politically discussed, explored, and “But I do not see it anywhere on the horizon of the political agenda. It is super good that the
agenda potentially adopted and implemented in the future. European Commission is now really taking a closer look at the CE, because, to be honest,
it has to come from there, because nobody is going to kick off anything nationally. It must
be an entire economic area that chooses such a model (CE).”—Interview G
“This is a political task (to facilitate the way to a CE)”—Interviewee H
Digitalization On the one hand, digitalization refers to the information transfer from an analog to a digital “I think it makes sense from a framing and narrative perspective to positively link CE with
storage form. On the other hand, it encompasses with the translation of tasks that have issues such as innovation, digitalization and everything that is being hyped.”—Interviewee
been performed by humans to the computer. Furthermore, digitalization depicts social G
transition processes that are triggered, accompanied, and realized by digital technologies. “Digitalization is obviously a driver for CBMs.”—Interviewee I
Civil society Civil society actors comprise voluntary associations, charities, initiatives, nongovernmental “But I think that through the pressure from the street, for example Fridays-for-Future, and
actors organizations or nonprofit organizations. These also include social movements, although from the European Union, the CE issue automatically becomes very relevant for the
they are not organizations in the proper sense (e.g., Fridays for Future). The aims and industrie.”—Interviewee C
purposes of civil society actors refer to general social and ecological problems as well as “Fridays-for-future are the transformers, because they ask their parents at home, “What do
concerns and needs of specific groups at a local, regional, national, or international scale. you do at work?” And then they start thinking about it. Thet's where the reflection
process begins.”—Interviewee D
27812782 HOFMANN AND JAEGER-ERBEN possible responses, without knowing how the inside of the black box management and equivalent departments. In accordance with intra- is designed and organized. It is a construct that consists of both organizational separation, design and RD departments receive direc- entrance and exit, but its inner architecture is opaque. Hence, a black tives from firm decision-makers regarding experimenting with new box ensures a specific functionality, but its manner of functioning is material compositions of single products, such as the substitution of unknown (Baecker, 1999). The results indicate that input factors that raw materials with recycled polymers collected from the ocean (ecolog- stimulate CBM implementation are known to established firms that ical modification of product features). Or an apparel store manager have already started to explore circular business development. These receives instructions from senior management to provide returns boxes factors tend to be predominantly debated in the strategic management, for used garments in the shop to demonstrate to store patrons the corporate sustainability, and business development departments of firm’s assumption of responsibility for their products after the usage firms. Other functional departments, such as design, logistics, procure- phase. Such change efforts tend to amount to isolated, small-scale top- ment, and operations, are not involved in strategic deliberations regard- down CE projects that only intersect with the established BM in the ing circular corporate reinventions, with such exclusion reflecting intra- periphery and do not shift the extant arrangement and direction of organizational separation (words in italics refer to the conceptual model value creation modes. The paradigm of acceleration, seen in activities and defined in the glossary). Applying new technologies, especially digi- such as increasing the frequency of product innovation and maximizing tal ones (digitalization), involving relevant stakeholders in co-design the number of products sold within a certain period, may thus manifest procedures of new products and services (i.e., civil society groups), itself even more strongly. In order to respond to stakeholder claims and cooperation within value creation networks (modus of cooperation) thereby ensure the firm’s own operational legitimacy, these peripheral and reorganizing producer-consumer-relationships were frequently changes to the existing BM are communicated effectively to the public discussed premises for the development and successful realization of as successful CE activities (circular washing). The data show that after CBMs (black box input). The intended circular value creation modes initial setbacks, management in this subset of firms becomes disen- include, for example, repairing, maintaining, and refurbishing of prod- chanted as the desired effects of small-scale and top-down CE projects ucts and components, managing reverse logistic systems, and per- fail to materialize in the first year following implementation. For exam- forming services (black box output). But how might the principles of ple, the sales of products made from recycled ocean plastics may even- CBMs (black box input) be integrated into daily business routines and tually stagnate at low levels, or returns of used textiles may be minimal, how to orchestrate them to achieve the intended circular creation with the cost of working with recyclers exceeding the financial benefits modes (black box output)? Beyond these internal contingencies, the of the project. The expected reputational boost has not been realized, data reveal that incumbents are also subjected to uncertain future which should actually lead to an increase in sales. When project-related profit, product streams, and product return flows. They see themselves objectives have not been achieved within a time frame determined by confronted with consumers who derive their identity from possessions strategic management, CE efforts tend to be terminated, reflecting the and satisfy their needs by shopping new products (consumerism). short-term time horizon of these firms. Firms that aspire to fulfill socie- Moreover, they face international pressure to be competitive (market tal expectations through CE efforts cooperate more or less with differ- dynamics), and are exposed to governance structures and legislative ent actor groups within the extended value creation network. For regulations that directly and indirectly support linear value creation example, a footwear producer may work with beach plastic cleanup modes, represented in the model by “political agendas” and “legal businesses and recyclers to develop and produce a new shoe model. In frameworks.” It appears that a lack of knowledge about internal initial such cases of inter-organizational separation, functional areas and gateways for CBM innovation as well as external social needs engen- value creation roles are clearly divided among the participating network ders organizational tentativeness. This timidity may result from a loss actors, who try to achieve individually formulated corporate objectives. of confidence in anticipating future pathways, triggered by uncertainty Where cleanup businesses collect plastic from beaches, recyclers and perceived heteronomy. Firms associated with the reproduction of reprocess beach plastics, subcontractors create shoes on behalf of the linear BMs are described as overwhelmed by the increasing complexity footwear corporation, retailers distribute the product, and consumers of the world, with the firm’s trajectory by its social environment. That satisfy their need for protected feet. It seems that each part of the net- is, firm actors contribute to socio-economic developments only if work develop a unique approach to performing their respective func- stakeholders provoke them. Firms, thus, are externally controlled tions in the value creation network in the most effective and efficient bureaucratic organizations and as passive, reactive social actors that way, with the perspectives and environments of the other network par- merely adapt to their social environment (Schumpeter, 1976). They are ticipants occasionally incorporated into the firms’ intra-organizational triggered and driven by foreignness, “fight[ing] with their backs to the decision-making processes (modus of cooperation). wall” (Interviewee B) trying to pursue economic, social, and ecological trends through elaborated strategic plans (heteronomy). Nevertheless, to demonstrate their capacity to anticipate accusations of internal and 4.2 | Transition Tendencies towards CBMs external stakeholder groups and highlight their awareness of sustain- ability issues, firms associated with the reproduction of linear BMs tend Based on the interviews conducted, it is apparent that unidirectional to decide to change their unidirectional oriented value creation modes and linear business thinking and acting are deeply anchored in domi- marginally. This is despite the extensive barriers identified by strategic nant patterns of organizational communication and decision-making,
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